Mondi First-Half Profits Rise 35% on Acquisitions, Packaging

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Mondi Ltd., a South African maker of packaging and paper, said first-half earnings rose 35 percent as acquisitions and a shift to packaging products helped offset the affect of sluggish economies.

Underlying operating profit for the six months through June advanced to 366 million euros ($488 million), compared with 272 million euros a year earlier, the company said in a statement today. Sales for the period rose to 3.34 billion euros from 2.82 billion euros, it said. The company raised its half-year dividend by 7 percent to 9.55 euro cents a share.

“We are starting to get benefit of the synergies” of the acquisitions, Mondi Chief Executive Officer David Hathorn said in a phone interview.“Packaging and paper businesses have enjoyed an extremely successful six months.”

Mondi shares advanced 2.7 percent to 155 rand at the close in Johannesburg, the highest since July 2007, valuing the company at 75.4 billion rand ($7.7 billion). The stock has gained 68 percent this year, the third-best performer on the 166-member FTSE/JSE Africa All-Share Index.

UBS raised its full-year estimate for Mondi’s earnings before taxes and interest by 4 percent to 696 million euros, analysts Catriona O’Grady, Nishal Ramloutan and David Hallden said in a report received by e-mail.

Reducing Exposure

Mondi is benefiting from a shift to packaging products, which now account for more than two-thirds of its output, according to Hathorn. The company is reducing its exposure to stagnant economies to expand in new markets. The company bought Greven, Germany-based Nordenia from Oaktree Capital Group LLC in July last year to strengthen its position in Eastern Europe. It also bought two corrugated-box plants and a recycled-containerboard mill in Germany and the Czech Republic in September.

Packaging products “enjoy structural growth in both good and bad times,” Hathorn said. “Even with the soft macroeconomic environment, we have seen volume growth.”

The company’s earnings improved even after taking a special items charge of 68 million euros, resulting from restructuring plans in Europe and South Africa during the period. “There is no pressing need for any further rationalization,” the CEO said.

“The positive share price response in the wake of the pre-release appears to have adequately reflected the strength of results,” Kartik Swaminathan and Fabio Lopes, research analysts at Bank of America Merill Lynch, said in a report received by e-mail.